1. Field of the Invention
The present invention relates generally to manufacturing sourcing and more particularly, to a system and method for objectively assessing a product's manufacturing complexity based on various product criteria.
2. Background of the Invention
The world has become a global economy. As a result, more and more Unites States based companies are taking advantage of cheaper resources, such as labor and materials, available in other countries. In recent years, computer and electronics companies have looked increasingly to outsourcing of development and manufacturing work as a strategy to reduce development and manufacturing expense. If used for the correct subset of products and properly executed, outsourcing can make a business more efficient by reducing the overall end-to-end costs. On the other hand, if used for products that are excessively complex to manufacture and/or executed improperly, outsourcing can result in increased overall end-to-end costs. Additionally, outsourcing products that are excessively complex to manufacture and/or executed improperly can lead to decreased quality which offsets any initial saving with increased warranty costs and potential revenue loss due to customer dissatisfaction.
Although the concept may seem straight forward, in practice, making the correct decision on which products, subassembly designs, and manufacturing work to outsource, and which to continue to keep in house (at the domestic manufacturing facility), is difficult. At the highest level, to make the correct decision, all that needs to be done is to determine which products are at the basic end of the scale and which are at the complex end.
Basic products would be in a group consisting of those products and subassemblies that are easy to design and easy to manufacture. The basic product group would be those products that typically represent “Low-End” (LE) products, or those that require less-skilled lower-cost labor. Low end products would be among the first product candidates to outsource since they are generally easier to design and relatively easy to manufacture.
A second group of products, the “complex” products, consist of more “High-End” (HE) products that may require specialized skills, more experienced workers, unique tools, and a specialized infrastructure for product development, manufacturing, and testing. The design, manufacturing, and testing of these high-end products would most often remain in house and in the hands of experienced teams that have already developed these specialized skills. Additionally, many products are the result of cutting edge not-yet-disclosed intellectual property (IP) of all types that must be contained and protected by the company so that it remains a secret to competitors. Being careful to keep high-end products in-house minimizes risk and ensures that consistent product quality is maintained.
In practice, determining which products are basic, which are complex, and which are in between is a difficult endeavor. The determination cannot be made by only considering which are HE products and which are LE products. For example, a mainframe computer would typically be thought of as a HE “scale up” type system, i.e., a complex product. But what about a cluster of basic computers? Does a cluster of computers become a complex system or just a collection of basic computers? This type of system may utilizes some of the most basic LE servers configured together to behave as a single “more complex” system. This is sometimes referred to as a “scale out” system.
The question then becomes, should a clustered system fall into the LE group if its primary building blocks are LE products or should it be part of the HE group since the cluster can be viewed as a high-performance complex system ordered as an single entity? Other considerations factor in, such as how the customer views the product and what their expectations are about its functional characteristics and quality.
To give a specific example, Blades™ servers, manufactured by International Business Machines, Inc., are relatively new. A single Blade™ computer is an example of a LE high-performance computer. The single Blade™ computer typically has a single board. Blade™ computers are interconnected via a high-speed network (typically Ethernet) build right into a pluggable planar board structure to form a Blade™ center. A further complication to the determination of product complexity is that different types of single Blade™ computers can coexist in a single Blade's™ center. There may be an Intel Blade™ computer, a Power Blade™ computer, and a storage Blade™ computer coexisting in a Blade™ center all running different operating systems (e.g. Windows, Linux, AIX, . . . and more.) Should a Blades™ center be treated as a LE product or a HE product?
In addition to design and system complexity issues discussed above, financial considerations are an important aspect of any outsourcing decision. Typically a LE product group is composed of higher-volume lower-profit-margin products. Accordingly, the HE product grouping would more typically have lower-volume higher-profit-margin products. However, in practice there exists a substantial number of lower-volume lower-margin-products and some higher-volume higher-margin-products.
A product's profit margin is often times a function of where in its life cycle the product resides. For instance, very new products, those products recently introduced to the market, and older products, those that have been available for some time and will soon be withdrawn from the market will typically have lower volumes. A new or revolutionary type of product may have a much higher profit-margin, independent of volume, especially if few competitors exist.
A question many companies face is whether financial considerations should go into the outsourcing decision? Clearly it would seem that a business would want to proceed more cautiously with higher-profit-margin products because the risk of outsourcing difficulties may not be worth the manufacturing cost saved. On lower profit-margin products, however, outsourcing to gain lower-cost manufacturing may be a necessity.
Determining which products are too complex and difficult to outsource and which are not, continues to be a challenge. Prior-art methods and systems for making outsourcing determinations have suffered from the disadvantage of being based on high-level subjective opinions. Incorrect decisions have been shown to have less than optimal consequences.
Accordingly, a need exists to overcome the difficulties with optimizing manufacturing outsourcing and to provide an objective and more repeatable system to determine product manufacturing outsourcing decisions.